U.S. Energy Storage: 2015 Year in Review Ravi Manghani Senior Energy Storage Analyst manghani@gtmresearch.com March 2016
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Contents 1. Deployment Trends 3 2. Market Drivers 8 3. Outlook 22 2
1. Deployment Trends
U.S. Annual Energy Storage Deployments (MW) A Record Year for U.S. Energy Storage Market With 221 MW of Deployments Front of the Meter Behind the Meter Total 200 150 100 40 250 35 200 30 25 150 20 15 100 221 50 10 5 50 0 2012 2013 2014 2015 0 2012 2013 2014 2015 0 2012 2013 2014 2015 Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 4
Quarterly U.S. Energy Storage Deployments (MW) U.S. Deployed More Energy Storage in Fourth Quarter of 2015 Than Previous Two Years 120 100 80 60 40 20 - Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Residential Non-Residential Utility Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 5
PJM (Excl. NJ), California and Hawaii Led Utility, Non-Residential, and Residential Segments in 2015 Utility Non-Residential Residential All Others All Others Hawaii New York California Hawaii PJM (Excl. NJ) California All Others Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review. *GTM Research is currently monitoring seven individual markets. Complete coverage of all markets is available in the full report. 6
Energy Storage Deployments by Technology (MW) Lithium-Ion Technologies Made Up 96% of 2015 Deployments (MW) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Lithium Ion Lead Acid Sodium Chemistries Flow - Vanadium Flow - Zinc Other Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review. Other includes flywheel and unreported energy storage technologies 7
2. Market Drivers Five Biggest Themes of 2015 and Beyond
Five Key Storage Market Drivers in 2015 #1 System Cost Reductions Continue at Rapid Pace #2 Wholesale Markets Structures Develop to Include Storage #3 Strong Renewables Growth Bolsters Storage Growth #4 Storage Mandates and All-Source RFOs Become a Commonplace #5 Storage Emerges As a Viable Technology for Grid Services 9
Storage BOS Cost ($/kw) 1) 41% Storage BOS Costs Reduction by 2020; Reach Below $400/kW EPC Soft Costs Hardware EPC interconnection overhead project origination SCADA/controller containerization inverter EPC Soft Costs Hardware Storage BOS Costs to Reach $398/kW by 2020 Hardware Costs Reduce by 48% Soft Costs Reduce by 31% EPC Costs Reduce by 31% EPC interconnection overhead project origination SCADA/controller containerization inverter 2015 2015 2020E 2020E Source: GTM Grid-Scale Energy Storage Balance of Systems 2015-2020: Architectures, Costs and Players 10
Q4 2015 System Price Ranges ($/kwh) Q4 2015 System Price Ranges ($/kw) 1) Front-of-Meter System Prices Expected to Drop 20% over Next Two Years Utility-Scale Price Trends Q4 2015, Energy Applications 2 Hours ($/kwh) Utility-Scale Price Trends Q4 2015, Power Applications ($/kw) $1,400 $1,400 $1,200 $1,200 $1,200 $1,200 $1,000 $800 $600 $900 $700 $1,000 $700 $1,000 $800 $600 $1,000 $800 $1,000 $800 $650 $400 $500 $400 $200 $200 $0 Utility (Energy Application, $/kwh) - Q4 2015 Utility (Energy Application, $/kwh) - 2017E $0 Utility (Power Application, Utility (Power Application, $/kw) - Q4 2015 $/kw) - 2017E Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 11
2) Wholesale Markets Structures Evolving to Include Storage CAISO reduced performance threshold for frequency regulation CAISO approved DERP framework PJM reduced RegD cap of 40% from the previous cap of 62%. A Senior Task Force created to re-evaluate application of marginal benefit function to regulation market. MISO created a platform to address storage-related market rules and questions, ranging from development of a fast AGC signal to tariffs and storage classification. Jan 15 Mar 15 Jul 15 Aug 15 Oct 15 Nov 15 Jan 16 Feb 16 SPP implemented pay-forperformance compensation for frequency regulation ISO-NE introduced energyneutral regulation signal and different parameter sets to track conventional and energy-neutral dispatched resources ERCOT established the DREAM Task Force to determine protocols and market rules for distributed energy resources FERC issued order relating to third-party provision of primary frequency response. CAISO Board of Governors approved changes to the nongenerator resource model under ESDER. Source: GTM Research/ESA U.S. Energy Storage Monitor 12
Rare Frequency of Use Occasional Frequent 3) Solar-Plus-Storage Benefits Vary in Duration and Frequency Ancillary Services Renewables Smoothing Peak Demand Charges Time-of-Use Shifting Power Quality DR Revenues DG Electricity Sales Fuel Costs Resiliency Short Medium Long Customer-site application Front-of-meter application Discharge Duration Both sides of meter Source: GTM Research 13
Annual Storage Deployments Paired With Renewables Differential (MW) 3) Tax Credit Extension to Spur Further Growth in Storage Paired With Renewables U.S. Storage Deployment Paired With Renewables Differential Vs. No Extension 200 150 100 50 0-50 2016E 2017E 2018E 2019E 2020E Residential Non-Residential Utility-Scale Compared to the non-itc scenario, GTM Research expects an additional 0.5 GW of storage paired with renewables from 2016-2020, a 33% increase compared to a scenario with no tax credit extension. Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 14
Total CA IOUs Procurement 4) California IOUs Started Procurement toward AB 2514 in 2014 Point of Interconnection 2014 Original 2014 Adjusted 2016 2018 2020 Total Southern California Edison Transmission 50 0 65 85 110 310 Distribution 30 16.3 40 50 65 185 Customer 10 0 15 25 35 85 Subtotal SCE 90 16.3 120 160 210 580 Pacific Gas & Electric Transmission 50 50 65 85 110 310 Distribution 30 21.5 40 50 65 185 Customer 10 6.5 15 25 35 85 Subtotal PG&E 90 78 120 160 210 580 San Diego Gas & Electric Transmission 10 10 15 22 33 80 Distribution 7 6 10 15 23 55 Customer 3 0 5 8 14 30 Subtotal SDG&E 20 16 30 45 70 165 1,000 900 800 767* 700 600 568 236 500 82 400 177 171 300 186* 200 310 361 27 25 100 54 0 80 PG&E SCE SDG&E Distribution Customer Unknown Total Total, All Three Utilities 200 110.3 270 365 490 1,325 Source: GTM Research/ESA U.S. Energy Storage Monitor. * LCR procurement RFO have modified 2014 targets, and may also count towards future rounds, reducing future procurement. SDG&E LCR RFO is for a minimum of 25 MW, maximum set at 800 MW 15
4) Progress by California IOUs for 2014 Energy Storage Procurements Under AB 2514 Utility 2014 Proposed Target Actual Procurements Timeline 50 MW transmission 24 MW distribution 7 projects totaling 75 MW selected in December 2015 First projects expected to be online by May 2017 Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 16.3 MW distribution (Plus Local Capacity Requirement procurement) 10 MW transmission, 6 MW distribution (Plus Local Capacity Requirement procurement) 2 projects totaling 16.3 MW selected in September 2015 12 MW solicited through LCR RFO. 4 MW sought through distribution deferral RFP, but elected not to procure any storage through the RFP. Projects can start as early as January 1, 2017; must be interconnected by December 1, 2024 Project can be on-line as early as 2017, interconnection required by January 1, 2022 16
4) Other Notable Utility Procurements from New York to Guam! Oregon Oregon DOE and U.S. DOE awarded $295,000 under Electrical Energy Storage Demonstration Project RFP. Colorado PSC Colorado/Xcel Energy submitted two storage project proposals under the Innovative Clean Technologies program. Arizona APS issued an all-source RFP to procure between 400 MW and 600 MW of capacity resources by 2020. TEP selected two 10 MW storage projects under REST New York PSEG Long Island amended its South Fork Resources RFP and issued a New Renewable Capacity and Energy RFP. Con Edison and Orange and Rockland issued a Grid-Scale Energy Storage RFI. Texas Austin Energy issued an RFI to solicit information on energy storage technology. Guam Guam Power Authority is soliciting bids for up to 40 MW of energy storage. Source: GTM Research/ESA U.S. Energy Storage Monitor Hawaii KIUC entered in a 20-year PPA with SolarCity for power from a 13 MW/52 MWh lithiumion storage system Federal U.S. DOE announced funding under Grid Modernization Initiative. 17
5) Significant Early Activity in Behind-The-Meter Storage for Grid Services IRM2 Pilot PJM Projects PJM Projects Tesla Powerwall Innovate Pilot CPUC DRAM SSP and XSP Pilots LCR Program Demand Management Program; Virtual Power Plant REV project PJM Projects EV and Storage Pilot Maryland Energy Administration Game Changer Grant Glasgow Electric Plant Board VPP Project Energy Excelerator/Stem Pilot; Oahu EV Charging Pilot Frito-Lay FRRS Pilot Deployed/ Program Ended Underway Source: GTM Research/ESA U.S. Energy Storage Monitor 18
5) Green Mountain Power to Use Behind-the-Meter Storage to Reduce Peak Capacity and Transmission Costs Total Number of Systems (Est.) Option 1 Option 2 Option 3 75 225 200 Ownership End-customer End-customer GMP Control End-customer Partial GMP Control GMP Control Utility Services None Capacity costs: Forward Capacity Market (FCM) 75% participation Transmission costs: Regional Network Service (RNS) 50% participation End-customer Benefits Back-up, Solar selfconsumption, and TOU shifting End-customer Payments $6,500 plus installation costs paid by customer to GMP. Source: Green Mountain Power, GTM Research Back-up, Solar self-consumption, and TOU shifting [Not mutually exclusive with utility services at all times] $6,500 plus installation costs paid by customer to GMP. Receives monthly bill credit of $31.76/month for 10 years Capacity costs: Forward Capacity Market (FCM) 100% participation Transmission costs: Regional Network Service (RNS) 75% participation Back-up, Solar self-consumption, and TOU shifting [Not mutually exclusive with utility services at all times] No upfront cost paid by customer. Monthly rate rider (lease) paid by customer to GMP: $37.50/month for 10 years 19
5) Con Edison VPP Pilot to Test Revenue Streams from Multiple Benefits Key Features 1.8 MW/4 MWh virtual power plant Partners: SunPower and Sunverge 20-year contract, demonstration phase for 2+ years Projected cost: $12M over project lifetime Con Edison estimates 8% returns by 2021, profitable within 10 years Project Goals Determine network benefits for grid from aggregate solar-plus-storage systems Determine customer resiliency benefits and assess customers willingness to pay for resiliency services Monetization value of grid services in competitive markets Inform rate design for and development of distribution-level markets through testing of different rate design mechanisms via VPP subgroups Source: GTM Research/ESA U.S. Energy Storage Monitor Assumptions Value Streams: Monthly resiliency payments (to SunPower or Con Ed), VPP s grid services (DR, firm capacity), revenue as distribution service platform (DSP) provider, referral fees Cost Structure: Initial investment in storage systems, system O&M Resiliency Fees: Con Ed will test various price levels and payment structures to inform rate design and develop product offering; Con Ed currently values capacity at $20/kW-month using a forward cost curve Revenue from VPP services and resiliency payments may lead to profitability before 2021 Three-Phase Assessment: Customer leads vs. customer signups, system integration (ability to consistently receive and respond to dispatch signals, response accuracy, response speed, communication latency, system uptime), and dispatch performance Project Length: Demo for 2+ years, but leases for 20; VPP seen as long-term business model 20
3. Outlook
Utility-Scale Energy Storage Caoacity By Requested Commissioning Date (MW) U.S. Utility-Scale Energy Storage Pipeline Dominated by California [Duh!] But There s More to Interconnection Queue 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Deployed Thru 2015 2016 2017 2018 2019 2020 Commissioning Date Unknown Arizona California Hawaii New Jersey New York PJM (Excl. NJ) Texas All Others Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 22
U.S. Energy Storage Deployments by Segment (MW) U.S. Annual Energy Storage Deployments Will Cross 1 GW in 2019, Reach 1.7 GW by 2020 1,800 1,600 1,400 1,200 1,000 800 600 Annual Deployments Cross 1 GW Mark in 2019 1,662 400 200-83 46 65 221 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E Utility Non-Residential Residential Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 23
U.S. Annual Energy Storage Market Size (Million $) U.S. Energy Storage Market to Reach $2.5 Billion by 2020, Sixfold Growth From 2015 $3,000 $2,500 Annual U.S. Energy Storage Market to Reach $1 Billion in 2018 $2,456 $2,000 $1,500 $1,000 $500 $432 $0 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E Utility Non-Residential Residential Source: GTM Research/ESA U.S. Energy Storage Monitor 2015 Year in Review 24
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